Mortgage rates going up.
Rising bond yields have pushed TD to raise some medium and long term mortage rates with more increases forecast:
Soaring bond yields have set the stage for a second round of interest rate hikes on residential mortgages in about a week.
After nudging rates higher on longer-term mortgages last Wednesday, Toronto-Dominion Bank yesterday raised borrowing costs on its five-year, fixed-rate loan by 40 basis points to 5.85 per cent, effective today.
Last week, TD and the other banks increased rates on five-year, fixed-rate mortgages by 20 basis points to 5.45 per cent.
While no major competitor had followed TD’s move by late yesterday, experts suggested higher rates are likely inevitable because banks are facing higher borrowing costs on the bond market. Banks tap the bond market to finance mortgages because they lend out more money than they attract through deposits.
So here are some questions for discussion: Mortgage rates are near an all-time low, which means you can still borrow money cheaply and local house prices have dropped more than 10% from their peak. So is now a good time to buy? What happens to prices when mortgage rates go up? Are you saving for a higher down payment in an higher interest rate environment or jumping in now, potentially paying more but with a lower interest rate on the debt? What about buying in non-local markets that have fallen closer to 50% off from their peak?
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June 12th, 2009 at 9:50 am
patriotz:
Very good point about the debt ratio being much higher in BC. If you ever run across the number I would be very interested to see it. You how difficult it is to real time information in this province.
June 12th, 2009 at 6:46 am
Anonymous:
There may be lots of dumb financial planners since financial planning is not regulated and anyone can call himself a financial planner. But I would think in most cases it is the customer who is dumb. If you anyone goes to a lawyer, an accountant or even a plumber, he is expection to pay a hour rate. Nearly 100% people expecting to receive financial advice for free. Everyone has to make a living, right?
June 12th, 2009 at 2:05 am
None of the units in the Coquitlam fire were pre-sold. I went to their site and there appears to have been an attempt to pre-sell them: http://www.springbankcorp.com/Projects.aspx?ID=7
The developer indicates that they will build again. Maybe, but probably at a much later date. If the Evergreen Line is stalled another decade, I have my doubts though.
News reference:
“The condo complex was called Evergreen, a venture that was scheduled to be completed in September, one of the developers told CBC News on Thursday.
None of the units had been presold, and the developers said they were insured and would mostly likely rebuild the complex.”
http://www.cbc.ca/canada/briti.....-fire.html
June 12th, 2009 at 12:48 am
oneangryslav:
“…The real debt of Canadians is at an all time high at 130% of disposable income…”
realpaul, do you know if that figure includes mortgage debt?
Yes. Remember there are a lot of people who have no non-mortgage debt at all. There is no way the rest could borrow enough to average out at 130% of income.
What matters for mortgage debt, like any other capital debt (as opposed to consumer debt), is whether the capital asset yields enough income to cover the interest payments. If so, the asset/debt portfolio is actually making money for the borrower. Like the preferred shares that I bought in my margin account a few months ago.
However if not – like for RE in BC, where the rental value is far less than interest cost for any house bought during the bubble – the portfolio loses money for the borrower, big time, long term.
One more thing – that 130% is the Canada-wide average – the average for BC is way higher.
June 11th, 2009 at 11:21 pm
afc:Hey dumbass 320 there are 319 other financial planners have been found on blogs all of them looks like an idiots now.
June 11th, 2009 at 10:24 pm
Bob:
Bob, I am a lender and a financial planner. I assume you need two income to serve your $500K mortgage. I don’t know how many kids you have and what kind of life style you have. I have many clients with $500K mortgage with a rate around 4%. One couple with combined income of $130K now in trouble to handle their mortgage payments. Their PLC and visa is up to the limit. For myself, I have a combined income just over $160K, I would never borrow $500K. Lots of things could happen, one of you could lose his/her job. It could happen to anybody. My several co-workers just got laid off. Probably they never thought it could happen to them since a couple of them had been working for our institution for over 20 years.
I agree with you, if you can handle the payment (don’t forget property tax, insurance, utility, reparement), you may end up at a similar position with some one waited and bought cheaper but with a higher interest rate.
June 11th, 2009 at 10:15 pm
Depends where Bob’s house is located. $1900 to $2100 is pretty much going rent right now for a whole house in the Langley area. $1400-1600 gets you a townhouse only or the top half of a house. Might be different in other areas of course. I’ve only been watching Langley for the past few months, so I don’t know about different areas.
June 11th, 2009 at 10:05 pm
Bob. I wont raise obvious prior points in that you paid too much for the house to begin with. I think your being too agressive with rental equivalent of the house. I doubt your house would rent for $2,100 per month. Assuming the house you own (well the bank owns it until you pay that mortgage off) is worth $550,000, the rent should be around $1,500 to $,1750 tops in todays market. I figure the house we are in is worth $550,000 and we are paying $1,450 in rent. So not only in this artificial low interest rate environment (rates about to and are rocketing upwards) are your monthly mortgage payments higher than rent equivalent, you have to pay property taxes, insurance, utilities (sewer and water), R&M. I dont get the concept of long term home. I like the fact after a couple of years I get sick of one place or neighbourhood and can leave with one months notice.
June 11th, 2009 at 9:34 pm
oneangryslav:
#51 OAS, it’s actually 138% but who’s quibbling. The calculation is is the article
“The conventional wisdom seems to be that the financial situation of Canadian households is generally sound and certainly much better than that of our profligate and heavily indebted American neighbours. The Bank of Canada argued in its end of 2008 Financial System Review that “(O)verall, despite a modest deterioration, the financial position of the Canadian household sector remains relatively positive.” ( p.21) The 2009 Budget displayed a re-assuring Chart showing US household wealth falling far more precipitously than in Canada. (Chart 2.5). And it is true that household debt as a percentage of after tax (disposable) income in 2008 was, at 138%”
http://www.progressive-economi.....canadians/
“Yeehah, we’re all gonna die” as Country Joe and the Fish sang. It’s only money right and looky how shiny those counter tops are, and they’re giving me a free car to sign up today. OMG Droooooooooooollllllllllll.
June 11th, 2009 at 8:00 pm
”Dave Dosh
Satv
John
Browntown
Supraboy
Vancouverboom2”
Thanks for leaving us the rosetta stone of troll/jackasses.
June 11th, 2009 at 7:17 pm
Anonymous: D,s,j,b,s,v.also have few more names include username2010,laud speaker,first post etc.but so far on this thread.
Dave Dosh
Satv
John
Browntown
Supraboy
Vancouverboom2
June 11th, 2009 at 6:25 pm
thompson the troll mortgage broker is back.
he calls himself krissh and thumbsup and a bunch of other names. He thinks acting dumb and making dumb arguments might bring him more business.
June 11th, 2009 at 5:52 pm
I had some interesting bond conversations with people today and they pointed out the the US is having a heck of a time keeping bond yields where they want them. Apparently not much demand for the US 10 year bonds. So EVEN with the Government printing money and buying its own bonds to try to stabalize prices where they want them, they can’t. That was encouraging to me anyway. Seems like the government can try to control them, but doesn’t have complete control which is encouraging.
Thanks Crabman for the graph. I’m gonna have to try and puzzle over it a bit more later. Looks intruging though.
June 11th, 2009 at 5:47 pm
It would be so sweet if rates went waaaay up. I see the potential for them to. They’ve been so low for so long. It’s been annoying really.
June 11th, 2009 at 5:40 pm
Hey luc (post #2),
I’ve got 100% down payment, and wating for rates to go WAYYY up, to bring prices WAYYY down.
June 11th, 2009 at 4:50 pm
realpaul:
realpaul, do you know if that figure includes mortgage debt?
I just laugh when I hear the disparaging remarks about the profligacy of US residents from smug Canadians, and then point out to them that the our (Canada’s) debt burden (per capita) is even more onerous than than it is in the US.